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Do yourself a big favor since you are retired. I take it your daughter is of legal age and able to work to support herself. She wants to live with friends well that tells me she is still young. College kids want to stay with friends.
I would sell the condo. There are a number of things you can do with the money after paying the capitol gains tax.
Either save it in the bank for emergencies or for your daughter who knows nothing and has learned nothing about being responsible for her own actions.
You could also invest it in something like an annuity for you to leave your daughter in your will.
I suggest you never rent it. Renting is more work than you realize with or without a maintenance Company. Plus have you looked at what covid did to the landlords in this Country. Hell no don't rent to family, friends, strangers or even a nice neighbor. Enjoy your retirement.
If it didn’t go up but generated a cash flow it would be an investment.
When I bought my rentals I bought them expecting them not to go up in value, but generate a cash flow. That was most important to me. Several have earned enough pay for their purchase price because of the run up in real estate prices. Not expected, but welcomed.
The generation of cash flow, without expectation of capital gains, has been the justification for rental real estate investment in the Midwest. Prior to the past 2 years, cumulative gains have been low (or zero, or even negative). But in markets where gross rental proceeds can exceed mortgage payments, the cash flow situation can make sense.
A concern at this time, which I voice as a genuine question and not some prediction or admonition, is what to do, in case that prices fall... fall dramatically, and remain low for years. Is this... implausible? Then no worries. But what if this does happen? Then what happens to the landlord, who keeps enjoying OK cash flow, but who's sitting on staggering capital losses, even if "unrealized"?
The fear of loss applies to any investment, and certainly applies as of this writing, to the stock market. But there are stark and crucial differences. The small real estate investor buys one or two or a handful of properties... not 1000. Yet that is exactly the point of a stock index fund. The real estate equivalent would be a REIT. Second, somebody else - CEOs, engineers, salesmen, janitors - are responsible for running all of those companies, whose stock is in the indices. Own your own condo, and that responsibility is ultimately yours - even if you hire a property management company. Bit of a responsibility, no?
By one reckoning, the idea is to aspire to massive paper-holdings (be it stocks or real estate, via REITs, or even private equity), but to physically and directly own absolutely nothing.
The generation of cash flow, without expectation of capital gains, has been the justification for rental real estate investment in the Midwest.
I guess that includes me.
Quote:
... A concern at this time, which I voice as a genuine question and not some prediction or admonition, is what to do, in case that prices fall... fall dramatically, and remain low for years. Is this... implausible?
This is just a bubble. As all bubbles, it will bust.
Do not buy at the peak of the bubble. Who wants to be carrying the $1M note on a house assessed at $100k?
My concern is that when a bubble pops, isn't that usually triggered by some other world event? A war?
Quote:
... Then what happens to the landlord, who keeps enjoying OK cash flow, but who's sitting on staggering capital losses, even if "unrealized"?
Losses on paper are not the end of the world.
If you can build equity in the cost-basis of the property just relax.
Quote:
... The small real estate investor buys one or two or a handful of properties... not 1000. Yet that is exactly the point of a stock index fund. The real estate equivalent would be a REIT. Second, somebody else - CEOs, engineers, salesmen, janitors - are responsible for running all of those companies, whose stock is in the indices. Own your own condo, and that responsibility is ultimately yours - even if you hire a property management company. Bit of a responsibility, no?
good point.
It is running bare foot.
Quote:
... By one reckoning, the idea is to aspire to massive paper-holdings (be it stocks or real estate, via REITs, or even private equity), but to physically and directly own absolutely nothing.
good luck with that.
Owning rental real estate is what got my grandparents out of poverty in the Depression.
Location: Formerly Pleasanton Ca, now in Marietta Ga
10,356 posts, read 8,586,624 times
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Quote:
Originally Posted by ohio_peasant
The generation of cash flow, without expectation of capital gains, has been the justification for rental real estate investment in the Midwest. Prior to the past 2 years, cumulative gains have been low (or zero, or even negative). But in markets where gross rental proceeds can exceed mortgage payments, the cash flow situation can make sense.
A concern at this time, which I voice as a genuine question and not some prediction or admonition, is what to do, in case that prices fall... fall dramatically, and remain low for years. Is this... implausible? Then no worries. But what if this does happen? Then what happens to the landlord, who keeps enjoying OK cash flow, but who's sitting on staggering capital losses, even if "unrealized"?
The fear of loss applies to any investment, and certainly applies as of this writing, to the stock market. But there are stark and crucial differences. The small real estate investor buys one or two or a handful of properties... not 1000. Yet that is exactly the point of a stock index fund. The real estate equivalent would be a REIT. Second, somebody else - CEOs, engineers, salesmen, janitors - are responsible for running all of those companies, whose stock is in the indices. Own your own condo, and that responsibility is ultimately yours - even if you hire a property management company. Bit of a responsibility, no?
By one reckoning, the idea is to aspire to massive paper-holdings (be it stocks or real estate, via REITs, or even private equity), but to physically and directly own absolutely nothing.
It totally depends on what one is looking for. I’m not leaving them as an inheritance. It’s the Midwest and totally possible they can drop in value. For the first time in my life I bought with the expectation that it is very possible they can drop in value or simply never go up. What I needed was an income to live on... now, not in the future for retirement. If they drop in value but still give cash flow, that’s all I need.
When I pass and leave them to whoever, they may not be worth much to sell and cash out so they can buy an expensive car or vacations, but the cash flow might enable them to do those things or supplement their income or simply stop working like I did.
Yes it is a responsibility, but as they say, no one watches over your money like you will. I can make decisions whereas with stocks you can’t do anything but buy or sell.
It totally depends on what one is looking for. I’m not leaving them as an inheritance. It’s the Midwest and totally possible they can drop in value. For the first time in my life I bought with the expectation that it is very possible they can drop in value or simply never go up. What I needed was an income to live on... now, not in the future for retirement. If they drop in value but still give cash flow, that’s all I need.
When I pass and leave them to whoever, they may not be worth much to sell and cash out so they can buy an expensive car or vacations, but the cash flow might enable them to do those things or supplement their income or simply stop working like I did.
Yes it is a responsibility, but as they say, no one watches over your money like you will. I can make decisions whereas with stocks you can’t do anything but buy or sell.
The prevailing wisdom in the real-assets investment community (rental housing, farmland, commercial real estate, direct ownership of businesses like restaurants or laundromats, ...) is indeed to segregate cashflow from capital gains. I think that this matters when you have employees or otherwise need to attend to the costs of doing business. But from a personal investment viewpoint, what matters is growing one's portfolio in aggregate, does it not?
If my portfolio rises because of capital gains or lucky bets or whatever, I can always liquidate a portion of the portfolio to fund personal spending or emergency expenses.... No need to segregate between cash flow and capital gains. But if there are sharp capital losses and the portfolio falls, then maybe even several years' worth of good cash flow, won't cover the losses. I've suffered a grievous decline, even if the business is absolutely healthy from a running-stability point of view.
From a personal wealth viewpoint the cashflow vs. capital gains distinction is moot, just as the stock dividends vs. increase in the stock-price, is moot. All that I care about as a stock investor (individual stocks, or indices/funds) is having more money at year's end. It is irrelevant to me, if that "more" comes from a fat dividend payout, or nice appreciation in the stock price.
The difference, then, is between being a responsible steward of an ongoing business, vs. being a private individual who wants to build wealth and to replace conventional employment with alternative source of funds. In the former case, indeed cash flow is paramount, for if it breaks, the business fails. In the latter, one only cares about growing richer, and whether it's from monthly proceeds or some other means, all that matters is the literal bottom line.
We have a rental in a vacation mecca. It's rented through a property management firm that does all the advertising, reservations, handles the cleaning staff, provides a 24 hour emergency number to our paying guests, and arranges for minor or urgent maintenance tasks (unclogging the toilet, fixing a doorknob or faucet, etc). We pay all the utilities on auto-pay, and take care of major maintenance or replacement items when needed, since it's only about 75 minutes away, but we could easily have a handyman or contractor handle those for us. We consider it a business, and it provides about a third of our retirement income. We also consider it an investment, as it currently is valued at more than twice what we have invested in it. It's not a lot of trouble, since we have "people" to deal with the hassles, and we can stay in it ourselves, and treat our family and friends to a stay several times a year. Our paying guests typically stay from 3 to 10 days. For us, Covid was a financial boon! When no one wanted to stay in hotels, they switched over to private rentals, and since our place is driving distance to most of the eastern half of the US, folks could avoid flying to get there. Our occupancy rate went up to about 85% of the available days in the year. For 6 months last summer we never had a single vacant day.
For our finances it is both monthly cashflow (business), and it's a long-term investment. We've decided to keep it for a few more years, and we have the luxury of not needing to sell whenever a down market in the vacation industry might occur. We can just wait for a reversal and sell when we wish to move away, or if one of us passed, we would probably sell. We've talked over and over about selling and just buying ourselves a private (not for rent) vacation home, but to be honest, I don't want to pay utilities, insurance, taxes, etc, for something we use a few months a year, so we rent vacation homes when we travel. It's interesting to be a business owner and a customer of a similar business.
Location: Was Midvalley Oregon; Now Eastside Seattle area
13,080 posts, read 7,541,093 times
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OP.
We use rental for 1.retirement cashflow income; 2. warehousing money; 3. diversification; 4. Method to pass asset to heir(s).
JMO, we found that owning a debt free, rental condo was a hard way to make invest either in cash flow or appreciation. The rental condo competed against apartments for tenants and we absorbed to HOA fee. We in are a high value region. We had to buy something in a 1031 and this rental was the exact price we needed. We sold the condo in 2021 after 6 years of ownership, maybe 25% capital gain after fees but we still haven't figure out the depreciation recapture, extra taxes, and medicare bump next year.
We used the proceeds to pay off the mortgage on the other rental and gave some to DS (5 year gift rule) to help him on a downpayment for a new abode. We now have more net cashflow from the one rental vs two rentals. We need to raise rent again another ~2-4% to accommodate increased property taxes and bring us up to market. Entering 4th year of ownership, appreciation is slight to static. Nice location.
About 40% of our retirement income is from this remaining rental. 60% from SS, pension, and purchased annuities. Untapped trading accounts. We increased rent by 2% in 2021.
yMmV
Location: Formerly Pleasanton Ca, now in Marietta Ga
10,356 posts, read 8,586,624 times
Reputation: 16698
Quote:
Originally Posted by staystill
Do yourself a big favor since you are retired. I take it your daughter is of legal age and able to work to support herself. She wants to live with friends well that tells me she is still young. College kids want to stay with friends.
I would sell the condo. There are a number of things you can do with the money after paying the capitol gains tax.
Either save it in the bank for emergencies or for your daughter who knows nothing and has learned nothing about being responsible for her own actions.
You could also invest it in something like an annuity for you to leave your daughter in your will.
I suggest you never rent it. Renting is more work than you realize with or without a maintenance Company. Plus have you looked at what covid did to the landlords in this Country. Hell no don't rent to family, friends, strangers or even a nice neighbor. Enjoy your retirement.
I agree with most of this post.
I'll add that in my case I had the best year of rental during covid. I think the unemployment gave my tenants a nice income.
^^ Perhaps it did. But lots of tenants also took advantage of eviction moratoriums to not pay when they very well could have.
I'm also under the impression that landlord-tenant altercations were up.
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